56. Is the manufacturer likely to succeed in its action?

In most instances, an oral contract is valid. However, in certain agreements, like the one in the question's fact pattern, must be evidenced by a writing signed by the party sought to be bound. The Statute of Frauds does not require a formal written contract to be valid, the writing only needs to contain the «essential terms» of the agreement. Under the Uniform Commercial Code (UCC) for sale of goods, the writing only requires a signature and a quantity term.

Under common law, a final contract cannot be modified unless the modification is supported by new consideration. However, under the UCC, modifications to final contracts do not require additional consideration. Only good faith is necessary to make a modification enforceable.

A written contract can be modified orally. However, the modification of the contract must be in writing if the new contract, as modified, falls within the Statute of Frauds. Even under the UCC, for a sale of goods contract, if the contract as modified is for $500 or more, it must be evidenced by writing.

However, under UCC Section 2-201(3) there are three exceptions where contracts that fall under the Statute of Frauds are enforceable without a writing. One of these situations is when the goods have either been received and accepted OR paid for (UCC § 2-201(3)(c)). This type of part performance is sufficient to take a sale of goods contract out of the Statute of Frauds. In other words, if the seller has received and accepted the goods OR paid for the goods, the contract will be enforceable despite not complying with the Statute of Frauds writing requirement.

B is correct. Under the UCC, if the goods are either received and accepted OR paid for the contract may be enforceable (UCC § 2-201(3)(c)). Because the retailer received and accepted the first installment of 20,000 pens on April 1, the contract is now out of the Statute of Frauds, and just governed by the contracting rules of the UCC. As discussed above, the UCC does not require anything other than good faith to modify a contract for the sale of goods. There are no facts in the question that suggest either party modified in bad faith. Thus, the oral modification to the contract was valid, and the manufacturer cannot force the retailer to pay half the purchase price.

A is incorrect. A written contract can be modified orally. Here, the parties orally agreed on March 25 that payment would be due upon delivery of the second installment. Therefore, the March 25 oral agreement is effective. The fact that the modification was not in writing would not invalidate the modification. The only modifications that need to be in writing are contracts that as modified, fall into the Statute of Frauds. As explained above, the contract in the question's fact pattern is not in the Statute of Frauds so an oral modification is acceptable.

C is incorrect. Parol evidence can be offered to show subsequent modifications of a written contract because the parol evidence rule only applies to prior or contemporaneous negotiations. Parties may show they have altered an integrated written contract after its making.

D is incorrect. The UCC does not require new consideration for a modification. Here, because the contract is for a sale of goods, it falls within the UCC. Thus, additional consideration is not required to make the modification of this contract effective.